GE 2005 Annual Report Download - page 55

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Historically, we executed securitization transactions using entities sponsored by us and by third parties.
Beginning in 2003, we only have executed securitization transactions with third parties in the asset-backed
commercial paper and term markets. Securitization entities hold receivables secured by equipment, commercial and
residential real estate, credit card and trade receivables and other assets. Our total securitized assets at year-end 2005
amounted to $61.7 billion, a $3.5 billion increase from year-end 2004. Of that total, the off-balance sheet amount
was $43.8 billion, up $11.6 billion from December 31, 2004, and the amount in consolidated, liquidating
securitization entities was $17.9 billion, down $8.1 billion from December 31, 2004, reflecting repayments. See note
28 for further information.
We have extensive experience in evaluating economic, liquidity and credit risk related to the assets we
securitize. Assets held by these entities are of high quality and we actively monitor them in accordance with our
servicing role. We apply rigorous controls to the execution of securitization transactions and continuously monitor
developments affecting credit. In view of our experience and taking into consideration the historical depth and
liquidity of global commercial paper markets, we believe that, under any plausible future economic scenario, the
likelihood is remote that the financial support arrangements we provide to securitization entities could have an
adverse effect on our financial position or results of operations.
Debt Instruments, Guarantees and Covenants
The major debt rating agencies routinely evaluate the debt of GE, GECS and GE Capital, the major borrowing
affiliate of GECS. These agencies have given the highest debt ratings to GE and GE Capital (long-term rating
AAA/Aaa; short-term rating A-1+/P-1). One of our strategic objectives is to maintain these ratings, as they serve to
lower our cost of funds and to facilitate our access to a variety of lenders. We manage our businesses in a fashion
that is consistent with maintaining these ratings.
GE, GECS and GE Capital have distinct business characteristics that the major debt rating agencies
evaluate both quantitatively and qualitatively.
Quantitative measures include:
• Earnings and profitability, revenue growth, the breadth and diversity of sources of income and return on assets,
• Asset quality, including delinquency and write-off ratios and reserve coverage,
• Funding and liquidity, including cash generated from operating activities, leverage ratios such as debt-to-
capital, market access, back-up liquidity from banks and other sources, composition of total debt and interest
coverage, and
• Capital adequacy, including required capital and tangible leverage ratios.
Qualitative measures include:
• Franchise strength, including competitive advantage and market conditions and position,
• Strength of management, including experience, corporate governance and strategic thinking, and